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Intranational Trade and Regional Tax Rates: A Welfare Analysis on the U.S. Economy

Hakan Yilmazkuday

Florida International University

April 15, 2011

This paper analyzes the effects of personal tax rates on macroeconomic variables at regional and national levels through a general equilibrium trade model with private and public sectors, migrating individuals, intermediate inputs and final goods trade, and an analytical solution. The regional model can explain state-level variables in the U.S. almost perfectly. The counterfactuals on the U.S. economy suggest that a nationwide increase in the state-level dividend-income tax rates would be the best option to expand the private sector, tax revenues, and, most importantly, the individual welfare in all states; a nationwide increase in the state-level wage-income tax rates would hurt the economy in all states; property and sales taxes have fewer effects on the U.S. economy. The results are mainly driven by intermediate input trade.

Number of Pages in PDF File: 54

Keywords: Regional Taxes, Trade, Public Sector, Private Sector, US

JEL Classification: H24, H71, R12, R13, R32

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Date posted: July 5, 2010 ; Last revised: December 19, 2011

Suggested Citation

Yilmazkuday, Hakan, Intranational Trade and Regional Tax Rates: A Welfare Analysis on the U.S. Economy (April 15, 2011). Available at SSRN: http://ssrn.com/abstract=1634628 or http://dx.doi.org/10.2139/ssrn.1634628

Contact Information

Hakan Yilmazkuday (Contact Author)
Florida International University ( email )
Miami, FL 33199
United States
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